ACT 125

COMPANIES ACT 1965 (REVISED - 1973)

PART V - MANAGEMENT AND ADMINISTRATION

DIVISION 2 - DIRECTORS AND OFFICERS

Section 132E. Substantial property transaction by director or substantial shareholder.

(1) Subject to subsection (2) and section 132F, a company shall not carry into effect any arrangement or transaction where a director or a substantial shareholder of the company or its holding company, or a person connected with such a director or substantial shareholder— (a) acquires or is to acquire shares or non-cash assets of the requisite value, from the company; or (b) disposes of or is to dispose of shares or non-cash assets of the requisite value, to the company. (2) An arrangement or transaction which is carried into effect in contravention of subsection (1) shall be void, unless there is prior approval of the arrangement or transaction— (a) by a resolution of the company at a general meeting; or (b) by a resolution of the holding company at a general meeting, if the arrangement or transaction is in favour of a director or substantial shareholder of its holding company or person connected with such director or substantial shareholder. (3) The resolution of the company or its holding company at the general meeting of the company or its holding company to consider the arrangement or transaction shall be subject to the director, substantial shareholder or person connected with such director or substantial shareholder, as the case may be, abstaining from voting on the resolution whether or not to approve the arrangement or transaction. (4) Where an arrangement or transaction is carried into effect by a company in contravention of subsections (1) and (2) that director, substantial shareholder or person connected with such director or substantial shareholder and any director who knowingly authorized the arrangement or transaction shall, in addition to any other liability, be liable— (a) to account to the company for any gain which he had made directly or indirectly by the arrangement or transaction; and (b) jointly and severally with any person liable under this subsection, to indemnify the company for any loss or damage resulting from the arrangement or transaction. (5) The Court may, on the application of any member or director of the company, restrain the company from carrying into effect an arrangement or transaction in contravention of subsection (1). (6) A director or substantial shareholder of a company or its holding company, or a person connected with such director or substantial shareholder, in whose favour the company carries into effect an arrangement or transaction and who knows that such arrangement or transaction is carried into effect by a company in contravention of this section, or a director who knowingly authorized the company to carry into effect such arrangement or transaction, in contravention of this section, shall be guilty of an offence against this Act. Penalty: Imprisonment for seven years or two hundred and fifty thousand ringgit or both. (7) For the purposes of subsection (1)— (a) "person connected with a substantial shareholder" shall have the same meaning as that assigned to a "person connected with a director" in section 122A save that all references therein to a director shall be read as a reference to a substantial shareholder; (b) "requisite value", in the case of a company where all or any of its shares are listed for quotation on the official list of a Stock Exchange as defined under the Securities Industry Act 1983, shall be the same value as the value prescribed by the provisions in the listing requirements of the Exchange— (i) which relates to acquisitions or disposals by a company or its subsidiaries to which such provision applies; and (ii) which would require the approval of shareholders at a general meeting in accordance with the provisions of such listing requirements; (c) in the case of any company other than a company to which paragraph (b) is applicable, non-cash asset is of the requisite value if, at the time of the transaction, its value exceeds two hundred and fifty thousand ringgit or, if its value does not exceed two hundred and fifty thousand ringgit but exceeds ten per centum of the company's asset value provided it is not less than ten thousand ringgit, where— (i) the value of the company's assets is determined by reference to the accounts prepared and laid under Part VI in respect of the last financial year prior to the arrangement or transaction; or (ii) no accounts have been so prepared and laid before that time, the amount of the company's called up share capital.       Penalty: Imprisonment for seven years or two hundred and fifty thousand ringgit or both. (8) In this section— (a) a reference to the acquisition or disposal of a noncash asset includes the creation or extinction of an estate or interests in, or a right over, any property and also the discharge of any person's liability, other than liability for a liquidated sum; (b) "cash" includes foreign currency; (c) "director" includes the chief executive officer, the chief operating officer, the chief financial controller or any other person primarily responsible for the operations or financial management of a company, by whatever name called; (d) "non-cash asset" means any property or interest in property other than cash. [Subs. Act A1299:s.11]